Arbitron

Pandora CFO on ratings, ad sales, and subscriptions

Thursday, December 5, 2013 - 12:10pm

Pandora CFO Mike Herring addressed the Credit Suisse 2013 Technology Conference this week. The format was a moderated Q&A session. We pulled out three subjects within which Herring’s responses were of particular interest: ratings measurement, how Pandora sells ads, and its hybrid subscription/advertising revenue model.

On the subject of ratings, Herring pushed Pandora’s agenda of inclusion in traditional radio measurements developed by Arbitron (now Nielsen Audio). His talking points echoed what CEO Brian McAndrews said in Pandora’s recent quarterly earning teleconference, and we expect the company to continue hammering away on this issue. Currently Pandora releases a proprietary “share of total U.S. listening” metric every month, a number that disputed by some broadcast executives.

HERRING: “You mentioned Arbitron, they currently don’t measure streaming services like Pandora. Now that they’ve been acquired by Nielsen, conversations are ongoing. We’re optimistic that they’ll embrace the future [by] allowing us to be measured alongside broadcast radio. That’s what we’ve always wanted. Our release of monthly metrics are really about trying to put a stake in the ground about how we’re measured, how we stand up next to the competitors we have in the market for advertising dollars. We’d love to have that measure, [to be put] side by side within the Arbitron system.” 

Herring addressed a question about the rise of programmatic ad-buying, and how Pandora’s large-scale build-out of a sales network fits into the automation trend. Herring’s answer acknowledged the importance of both sides, and defends the future of personal selling.

HERRING: “So, you really have to think about it in two buckets. So, the audio side of the business or the broadcast side -- $15 billion in radio is really a consultative sale. You are [personally] pitching buyers on the value of your audience I don’t see that becoming an automated platform soon.” “We hear a lot about programmatic buying [...] on the digital side of things. And Pandora is going to be right alongside the leaders in that space in developing capabilities there. But on the audio side there will always be a feet on the street. You are out pitching agencies [which is] why we put people in 29 local markets last year to really pitch local radio advertisers.”

Herring addressed paid music and free music. When there is a steady focus on the subscriber number -- how many Pandora listeners pay a monthly fee to remove advertising -- analysts often must be reminded how Pandora prioritizes and balances the two sides of its business. In his reply, Herring valued subscriptions, but emphasized the advertising side of the revenue equation.

“[We] got to 3.18 million subscribers at the end of the last quarter. It’s a great business [which is] 20% of revenue. But at Pandora we fundamentally believe the big opportunity is not the 20% of people in the United States that are willing to pay for music. And there are a lot of streaming services that are fighting to get a piece of that market. We have a piece of it as an adjunct to our free business. We also have 67-69 million people who have grown up believing that music listening should be a free experience. They’re willing to listen to advertising associated with that. We think that’s a much bigger addressable market and that’s why we focus so much time on that. The subscription business will always be an important part of our business but not the main growth driver long term.”

Nielsen moves toward online listening measurements

Thursday, October 17, 2013 - 12:40pm

In the first methodology change after the acquisition of Arbitron, and its rebranding as Nielsen Audio, Nielsen has announced it will include radio online reruns in its ratings, according to Inside Radio and Audio4cast.

The decision is an inching movement toward measuring webcasts, and will be applied to a specific programming scenario -- when a station provides complete rerun loops online, as is the case with some morning shows. The online component must be unaltered, and include all content and commercials. The measurement will not stand alone, but will be bundled into the broader ratings picture

A 24-hour window applies: listeners who access the online repeat after that period will not be counted. This windowing limitation shares the same principle as Nielsen’s “Same Day” measurement of television viewing on DVRs -- in that measurement the 24-hour viewing day starts at 3:00am. The new radio-stream measurement applies to a different time-shifting opportunity for listeners that doesn’t involve home recording of the content.

Jennifer Lane of Audio4cast notes: “I’m sure this is the first of many changes that Nielsen will make to its measurement of audio.”

Nielsen/Arbitron merger puts cross-platform data on the horizon

Monday, September 23, 2013 - 12:20pm

Selling inventory across properties and platforms is historically difficult, plagued by confusion for the buyer and heavy educational lift for the seller. Part of the challenge lies in reconciling different measurement methods. When media planners must grapple with opportunities defined partly by siloed data formats, buying naturally falls within those silos.

One potential in the Nielsen acquisition of Arbitron, approved on Friday and expected to close next Monday, is the creation of cross-platform measurement standards that will smooth over the knowledge gaps between radio, streaming, and television consumption. Ideally, agencies seeking demographic or other audience categories would view an integrated usage landscape and position their brands with greater intelligence and efficiency. On the content side, seats might be more equitably positioned around the table, given a smarter and more integrated view of audience proportions. As Tom Taylor remarked, to many stakeholders a utopian integrated market "is so close they can taste it."

The Nielsen/Arbitron merger was agreed upon in principle in April, as a $48-per-share grab worth $1.6B. Friday’s FTC approval hinges on remedies designed to solve potential competitive strangulation.

The agency’s concern is that, in eliminating competition between the two data giants, and creating a cross-platform behemoth, clients would pay more for consolidated measurement than they did when dealing with separate entities. Further, a discouraging Goliath-vs.-upstarts scenario looms large in the FTC’s consideration of this merger.

The solution requires Nielsen to provide intellectual assets and technical assistance to an FTC-approved third party -- a remedy that does more than just allow competition; it fosters it. The remedy essentially creates and nurtures a startup cross-platform competitor. (FTC PR here. Full statement here.)

The technology in question is Arbitron's Portable People Meter (PPM), currently in use by ESPN and comScore. The FTC mandate requires that licensing arrangement and product support to continue for eight years. Nielsen also clarified in this morning's conference call its obligation to license and support the PPM platform for other emerging companies.

Speaking of competition, the FTC commissioners are not speaking with a unified voice in this case. Commissioner Joshua Wright disputes the remedy, and asserts that the merger should transpire sans the competition remedies. Wright’s headline quote: “In fact, there is no commercially available national syndicated cross-platform audience measurement service today. The Commission thus challenges the proposed transaction based upon what must be acknowledged as a novel theory—that is, that the merger will substantially lessen competition in a market that does not today exist.” (FTC dissenting view here.)

Commissioner Wright’s argument aside, the FTC remedy is not inconveniencing Nielsen CEO David Calhoun’s buoyant reception of the acquisition conditions. The Nielsen chief’s public statement calls the FTC package a “highly acceptable outcome.”

Starting next year, stations will need to be Arbitron customers to combine on-air, online listening ratings

Thursday, August 1, 2013 - 10:40am

Arbitron says it will discontinue "Total Line Reporting" for broadcasters that don't subscribe to its ratings service -- likely as a way "to woo back non-subscribers that benefit from TLR," suggests Inside Radio (here).

Total Line Reporting enables stations to combine their online simulcast listening with over-the-air listening for ratings purposes. Now, starting with the winter 2014 book in diary markets and the January 2014 report in PPM markets, non-subscribers will be reported as individual stations only. Ad buyers will not see combined ratings for simulcasts of non-subscribing stations, beginning next year.

As we reported here, Arbitron recently changed the requirements for what's considered a "simulcast," requiring stations to stream 100% identical content (programming and ads) only in their home Metro and DMA. The new policy allows the station to stream any content it likes outside its home Metro/DMA.

RAIN Summit Orlando will feature a discussion panel dedicated to ad-insertion and broadcast radio online simulcasts on September 17. We have more detail on that panel here.

Under new Arbitron policy, station TLR streams need only be 100% simulcasts in home Metro/DMA

Wednesday, June 19, 2013 - 12:50pm

Arbitron alerted its clients today that, at the request of the radio advisory council, it is eliminating the "simulcast" requirement for streaming outside a station's home Metro and DMA for those stations that include streaming audience in "total line reporting" (TLR).

The new rule says a station need only stream a 100% simulcast (all content, including commercials) in its home Metro and DMA. The new policy allows the station to stream any content it likes outside its home Metro/DMA.

Previously, Arbitron required stations that wanted to include streaming listeners in TLR audience to stream exactly what went out over the air, including local advertising. This meant a potential waste of ad inventory that could have been used more effectively. A listener three states away would hear the same ad for Pete's Pizza on 10th and Main a local listener heard.

Beginning last month Arbitron began allowing stations to substitute ads to streaming listeners outside a station's metro, but only with ads from the same advertiser, and still be eligible for TLR (see RAIN here). While this may have worked for national advertisers, it usually didn't help stations still airing ads that only made sense for local listeners.

This news will likely change the dynamic of the debate amongst broadcasters whether to simulcast streams, or take advantage of ad-insertion technology to increase ad inventory (or, for that matter, whether to stream at all).

Arbitron's new rule goes into effect with the July PPM period and Summer diary survey.

ESPN releases key findings of multi-platform audience measurement with comScore and Arbitron

Thursday, June 13, 2013 - 12:55pm

ESPN has just wrapped up a month-long audience measurement initiative as a "proof-of-concept" for a multi-platform measurement solution of audio/video/display media consumption from comScore and Arbitron.

The measurement initiative, Project Blueprint, polled data from radio, television, PCs, smartphones, and tablets. Launched last September (we reported on it here), the study ran in February.

ESPN has released some key findings now. Read more in TVNewsCheck here.

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